Pay 2.75% convenience fee on my college tuition bill? An extra 275$ on top of the original 10 grand. Sounds great. I’ll take it. Thank you.

Some colleges will let you charge tuition to a credit card.  Some have a “convenience fee” of about 2.75%.  Charging 10k$ worth of tuition with a 2.75% fee would result in a whopping 275$ fee all for convenience.  So instead of spending 10 grand, you have spent 10,275$.  The 10275$ debt is now on a credit card that may have already started charging interest.  This sounds terrible.

But, it may be a great for the right person, in the right situation.  Like me.

The right situation

*High credit score.

*10,275$ sitting in a bank account, ready to pay the credit card bill.

*Recently applied for, been accepted, and received 3 new credit cards.

*Those 3 credit cards have balances of zero.

*Those cards have introductory bonuses, based on credit card spend.

If that does not describe you, pay attention.  If you don’t already have the cash, or your credit score is low, stop reading now. This advice is terrible, for you.  Abort!!!

If it described you, or could soon describe you, read on.

It is a well-known technique to go after many credit card bonuses.  Lots of blogs cover this strategy well, and that is not what I intend to teach.  If you need to learn this, read these guys.  A married couple can go after each offer twice.  If my soon to be 18 year old son Jumpstart Jr. is approved for some cards, then we can go for each offer 3 times.  Jumpstart Jr. will probably not be approved at his 18th birthday, but at age 20 after I have helped him establish accounts and a credit score. Maybe.  So, my son, my wife, and I all apply for a credit card that offers a 400$ cash back bonus, with a required 3k$ spend, in the first 3 months.  We now need to spend 9k$ in 3 months, in order to earn 1200$ cash back.

We spend 10k$ on college tuition with the convenience fee.  We meet all 3 spend thresholds and earn 1200$ in bonuses at a cost of 275$ in fees.  That puts us ahead 925$.  I leave Jr’s 400$ bonus in his account and keep 525$ for Mrs. Jumpstart and I.

My family would not typically spend 9k$ in 3 months.  There are ways to create “manufactured spend” and spend 9k$.  It can be done for a lower cost than 275$.  Once again I do not intend to teach you how to pretend to spend money.  If you want to learn, read the experts here.  I can and have manufactured spend, but it is a hassle.  Trips to Kroger checkout, then to Kroger money services counter, then to the bank. Each step with large suspicious-looking transactions.  The fear that something did not activate properly.  The chance that I misplace something.  Paying the 275$ fee versus 100$ in vanilla gift card fees and a bunch of hassle.  I choose the hassle free option.

My son will be in college 8 semesters.  Assuming I will pay 10k$ each semester.  That is 8 credit card bonuses for 3 family members, over the next 4 years.  All of it is hassle free.  It will cost 8*275 for a total of 2200$.  We will earn 24 bonuses.  If they are meager 250$ bonuses, they would have a value of 6000$.

Not all credit card bonuses are structured the same.  They require spends between any initial charge to 5000$, or more.  The bonuses can come in the form of cash, miles, hotel points, transferable points, or hotel nights.  People value those things differently.  An 80,000 ultimate rewards bonus (Chase UR) can be used for 800$ cash, expensive United flights, or expensive Hyatt stays.  Once again, I do not intend to teach this.  Read these guys to learn.resort-pic

The estimate above used conservative numbers.  My wife and I earn a lot more than 2 bonuses per year.  Many of the bonuses only require 1000$ in spend.  I usually don’t bite on a bonus until it is higher than 250$ in value.  My wife and I once got a card which earned us 2 nights each at any Hilton as the bonus.  My family stayed 2 nights at the Hilton South Beach in 2 rooms.  The hotel goes for 1500$ per night.  I would never have payed 6k$ for a hotel.  So I cannot claim, it was worth 6k$, but it was a great three days at south beach, in a hotel that 2 teachers would never have been able to afford.

I have spent a significant amount of time pretending to spend lots of money on credit cards.  Trips to Kroger, CVS, Staples, and banks.  Credit card companies are creating and enforcing policies to prevent manufactured spend.  It will be great to have a hassle free and legitimate way to spend 10k$ per semester.

Except, for the horrifying fact that I will no longer be pretending, and I will actually be spending 10,275$ each semester.

On another note, Frequent Miler’s recent post could be a great new option.  I have not checked the local toys-r-us for these cards.  I do not have a 529 account or federal student loan balance.  The fee is a smaller percentage.  There could be tax benefits?  I need to investigate gift cards.

Posted in Credit cards.

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